$1 billion of clients funds set to disappear in FX ponzi scheme

Almost 100 years has passed since the infamous Charles Ponzi orchestrated his crimes as a mainstay of New York’s underground confidence tricksters, however the principle by which his name has become synonymous is far from a thing of the past. In fact on the contrary, it is alive and well, with even higher amounts being plundered from several clients.

Today, it has emerged that investors in a FX ponzi scheme stand to lose a somewhat astonishing $1 billion.

Secure Investment, a website which has been promoting a high risk FX trading scheme for just over a year has become the subject of suspicion by many investors who, despite having parted with substantial sums in good faith, are now beginning to demonstrate concern over the validity of the site, and even more importantly, the intentions of its operators.

According to a report today by Bloomberg, British family doctor Rajibuddin Mandal from Birmingham began trading FX a few years ago, but lost £2,000 which was enough for him to conclude that he did not have the investing power to compete in the FX market, and that it was too complex and hazardous for inexperienced investors with small sums, therefore he began to search for professional assistance.

At this point, he came across the Secure Investment website, which stated quite openly that ““Ninety percent of traders in forex end up losing money.” Secure Investment boasted that it offered something safer and that it made trading decisions for investors and guaranteed their principal. Mr. Mandal believed that if he went down this route, even if he didn’t make money, the worst that could happen would be that he would break even, which will be the subject of a report by Bloomberg Markets next month.

Among bold claims made by Secure Investment was that it traded in excess of $4.8 billion daily for more than 100,000 investors in 140 countries. The company, although not providing any historical performance information, claimed that it displayed each of its daily trades, therefore clearly showing which ones were winners and which were losers. The site said investors had averaged net gains of 1 percent each trading day during the past five years.

The nefarious efforts of this site were not confined to a British audience, however. Bloomberg continued to report that on the other side of the Atlantic, another medical professional, Jaren Mark, from Florida stated that he monitored the Secure Investment website for nine months before deciding to invest. As with so many ponzi schemes and high yield investment plans (HYIPs), the Secure Investment website was peppered with videos which sell a dream, showing supposedly satisfied customers watching their investments grow and preparing for a luxurious, stress free retirement.

A further bold claim by the site detailed that the daily returns it promised would amount to an annual gain of about 250 percent, which is or more than 25 times the average annual return of the Standard & Poor’s 500 Index, with dividends reinvested, for the past 50 years.

In May and June last year, Mr. Mandal and his wife, Wasima, also a physician, invested $30,000 each with Secure, which required customers to use U.S. dollars. The Mandals swapped pounds for $60,000, using a bank. Following instructions from Secure, they then wired the money to banks in Australia and Cyprus to open their accounts.

Logging into the company’s website regularly, they watched as Secure traded the dollar versus the euro. Secure Investment’s website showed that their accounts had soared in value to a total of $245,000 — a fourfold increase — in just 10 months. The question is, how true was this?

Mr. Mandal says he decided to withdraw some money in March. In an e-mailed response, Secure Investments said he’d have to wait. It cited issues with the U.S. Foreign Account Tax Compliance Act, which is a Treasury Department rule that applies to U.S. citizens using foreign accounts — a law that was irrelevant to Mandal, who’s a U.K. citizen. The March 5 e-mail said Mandal would get the money in a few days.

“Thank you for your patience,” came the reply. Mandal says he wasn’t yet suspicious. He got another e-mail from Secure Investment on April 30 which stated “Our Technical Department is currently working on system updates. Our company sincerely apologizes for any temporary glitches that may occur.”

It was the day after this that website went offline. It never returned. Neither did the Mandals’ investment. As far as he knows, their entire $60,000 has disappeared forever.

“Every day, I saw they were making me profits,” Mr. Mandal says. “And then it’s suddenly gone. It gave me psychological pain and stress. I feel very embarrassed.”

If their money is lost for good, then the Mandals may have plenty of company. Investors around the world may have lost more than $1 billion, based on data posted on Secure Investment’s website and viewed by Bloomberg Markets two months before the site shut down.

“This type of forex fraud is an assault on the international financial system, victimizing investors in multiple countries while concealing where the wrongdoing took place,” says U.S. Senator Carl Levin, who is chairman of the Permanent Subcommittee on Investigations and became aware of Secure Investment when asked about it by Bloomberg Markets.

Customers in 11 countries on five continents say they have seen their money evaporate with Secure. Twenty-five investors interviewed say Secure, which was incorporated in Panama in 2008, had instructed them to wire money to banks in Australia, Cyprus, Latvia and Poland.

The company’s website provided an explanation: “From time to time, Secure Investment may change bank account information, because it chooses the financial partner that currently offers more profitable cooperation conditions.”

Secure Investment never revealed its true location and provided its clients with only some bank and related-company names, along with its call center’s toll-free phone numbers in Australia, Canada, Hong Kong, the U.K. and the U.S.

Secure Investment lured customers by creating its own good reputation and by publishing a seemingly successful trading record on its elaborate website. It was all a lie. The company’s claims to have offices and a large staff were also false. At least some of its so-called customer testimonials were actually delivered by actors.

Bloomberg revealed that the deception worked — for a while. In March, Secure Investment’s website was more popular than Forex.com, run by GAIN Captial Holding Inc., the second-largest U.S.-based, over-the-counter forex trading firm in the world, according to Alexa.com, a unit of Amazon.com Inc. that tracks page views of millions of websites.

The most common search sending traffic to Secure was the phrase “secure investment.” The average visitor to Secure’s site stayed for almost seven minutes and viewed seven pages, according to Alexa.

Secure Investments crafted a tangled financial web to harvest and hide investor money by setting up companies with different names incorporated in Belize, the British Virgin Islands and the U.K. Secure asked clients in e-mails to wire money to bank accounts held by those firms. By using related companies, the company managed to obscure the paper trail of investor funds that would end up with the firm.

The only public evidence that authorities have looked into Secure Investment comes from Panama. In July 2013, the website of Panama’s securities regulator, SMV, warned that the company wasn’t licensed or authorized to trade currencies. The regulator also said Secure Investment listed a false Panama City address as its headquarters.

The office addresses that Secure’s website listed in Hong Kong, London and Sydney were also phony. All of those were at sites run by international office leasing company Regus Plc. (RGU) London-based spokesman Andrew Brown researched his company’s records and found that Secure never used any of those locations.
July 2013. His account grew to more than $4,000 by February 2014, according to his online statements.

In an interview on March 10, seven weeks before secureinvestment.com vanished, Kane, 52, said he was comfortable with his investment. “I e-mailed a number of times with questions and concerns, and they’ve been very responsive in answering them,” he said.

“I would like to think that this is the trading vehicle for the next millennium,” Mr. Kane said. “People have been ripped off for so long by brokers, 401(k) managers and mutual fund managers.” Mr. Kane made a successful withdrawal in February.

“I wanted 500 bucks as a test to be sure I could get it back,” Mr. Kane said in March. Secure wired him his cash through a money-transfer company, Mayzus Financial Services Ltd., from Czech Savings Bank in Prague. “I almost kicked myself in the ass for pulling that out, because that’s $500 more that could have been earning me 1.21 percent per day,” Mr. Kane said.

By May 13, two weeks after the website shut down and two months after his first interview with Bloomberg Markets, Kane had a different view.

“We suspected it was too good to be true,” he said. “I’m glad I pulled out $500. What is most bothersome is the loss of the dream.”

Jaron Mark, a medical resident at a hospital in Tampa, Florida, says he spent nine months seeking a safe investment before he chose Secure. During that time, he monitored Secure’s website routinely, watched the daily trading reports showing consistent success and decided to invest with the company.

In April, he wired $10,000 to a bank in Latvia so that Secure could trade forex for him. Two weeks later, the Secure website was gone. At first, Mark, 31, says he wasn’t too concerned.

“They’d go down for maintenance temporarily,” he says. “Then they’d come back up, like clockwork. This time around, they didn’t.” He says he lost the majority of his savings. “I don’t make a lot of money,” he says. “It took me a long time to earn it. I’m hurt and upset. I don’t have much hope. I feel like a fool.”

The man identified by Secure Investments as its chief executive officer used the name Michael Sterling. A Secure Investment infomercial on the Web featuring Sterling begins with an exterior shot of the New York Stock Exchange. It shows gray-bearded Sterling describing his excitement about Secure.

“It’s really a very special feeling when you are doing something new, something unusual, which differs a lot from what others are doing,” he says.

Sterling then addresses Secure employees at their modern office building, as meetings in glass-walled conference rooms are shown. Interspersed through the infomercial are 30 more scenes of Manhattan, including Wall Street, Times Square and the Waldorf Astoria Hotel. Secure’s customer-service center never responded to repeated requests for an interview with Sterling.

Early on May 1, just hours after Secure’s website was gone, Bloomberg Markets was able to reach a customer-support representative. Francisco Ramirez was still staffing the site’s chat function. He was asked what happened.

“At the moment, there is technical maintenance going on with our website,” he said. “It will be back at any point of time. We are sorry for the inconvenience. After some time, it should work fine.”

No one at Secure Investment has responded to calls or e-mails since that day.

The company used a series of actors to pose as wealthy profiteers from the scheme, none of whom had any experience in FX. Many have since admitted this and have explained, as covered in the report by Bloomberg, that this was a smokescreen to create an image of wealth and that they were paid to ‘lie for a living.’

No case has been brought by any authorities against Secure Investment yet, but, if the perpetrators can be traced, it is surely only a matter of time.

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$1 billion of clients funds set to disappear in FX ponzi scheme


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